Financial Performance - Net revenues for the year ended March 31, 2025, decreased by $4.5 million, or 8.4%, to $49.4 million from $53.9 million in the prior year[186]. - Gross profit for the year ended March 31, 2025, was $42.9 million, resulting in a gross margin of 86.9%, up from 85.8% in the previous year[186][196]. - Operating expenses increased by approximately $49.9 million to $102.6 million for the year ended March 31, 2025, primarily due to a $29.1 million contingency for Delaware Litigation[198]. - The net loss from continuing operations for the year ended March 31, 2025, was $65.2 million, compared to a net loss of $5.4 million in the prior year[186]. - Adjusted EBITDA for the year ended March 31, 2025, was $15.3 million, down from $24.0 million in the previous year[189]. - The provision for federal and state income taxes for the year ended March 31, 2025, was approximately $6.3 million, compared to a benefit of $0.9 million in the prior year[200]. - For the year ended March 31, 2024, net revenues decreased by $9.2 million, or 14.6%, compared to the prior year due to normalization of firearm purchases post-COVID[203]. - Cost of revenues decreased by $1.5 million, or 16.0%, for the year ended March 31, 2024, attributed to lower gross merchandise sales[204]. - Adjusted EBITDA for the year ended March 31, 2024, was $23.97 million, down from $31.13 million in the prior year[202]. - Operating expenses increased by $1.1 million for the year ended March 31, 2024, primarily due to higher legal and professional fees[207]. - Gross margin percentage remained stable at 85% for both years ended March 31, 2024, and March 31, 2023[205]. Market Position and User Engagement - As of March 31, 2025, GunBroker had approximately 8.4 million registered users and averaged 3.67 million daily listings, highlighting its leadership in the U.S. online marketplace for outdoor and shooting sports products[23]. - The company has a strong brand recognition supported by compliance, platform reliability, and user experience, contributing to high levels of customer loyalty and repeat engagement[25]. - The company continues to invest in platform optimization, including analytics-based enhancements and personalized recommendations to support scalability and long-term growth[31]. - Recent platform enhancements include an improved shopping cart experience and a redesigned homepage to enhance user engagement[185][188]. - The company promotes its Marketplace through digital strategies, including targeted campaigns and enhanced visibility tools for sellers[27]. Regulatory and Compliance Risks - The company operates in a highly regulated industry, ensuring compliance with federal, state, and local laws regarding the sale of firearms and ammunition[38]. - The company is subject to numerous data privacy and security obligations, including the California Consumer Privacy Act (CCPA), which imposes specific obligations and potential fines for noncompliance[63]. - Compliance with evolving data privacy laws requires significant resources and may necessitate changes to services and practices, impacting operational efficiency[66]. - The company may face significant consequences, including government enforcement actions and litigation, if it fails to comply with data privacy and security obligations[67]. - The company is subject to evolving laws and regulations regarding payments, which could increase operating expenses and affect profitability[79]. - Changes in government regulations regarding firearms and ammunition could materially adversely impact the company's revenue and profitability, as sales of firearms represent a significant percentage of transaction-fee based revenue[115]. Cybersecurity and Operational Risks - Cybersecurity incidents pose a risk to the company's operations, potentially leading to loss of sensitive data, operational disruptions, and increased costs[57]. - The company faces risks related to cybersecurity incidents that could disrupt operations and harm its reputation[74]. - The company has established comprehensive cybersecurity measures overseen by the Board of Directors to protect information assets[142]. - Regular assessments and monitoring of third-party suppliers are conducted to manage cybersecurity risks associated with external partners[145]. - The Information Security Program is aligned with federal and state requirements, focusing on protecting personal and proprietary information[144]. - A failure of information technology systems due to cyberattacks or other factors could materially affect the company's financial condition and operational results[69]. - The company relies on its information technology systems to manage day-to-day operations, customer relationships, and financial records, making system integrity critical to its success[69]. - The company relies on third-party service providers for critical services such as credit card processing and fraud detection, which exposes it to risks if these providers fail to perform adequately[72]. Strategic Initiatives and Future Outlook - The company plans to expand market share and brand recognition by leveraging proprietary data to identify emerging market trends and refining its business model[26]. - The company anticipates that generative artificial intelligence will significantly impact e-commerce, and failure to adopt these technologies could harm its business[75]. - The company initiated a formal review of strategic alternatives, leading to the decision to sell the Ammunition segment[176]. - The company expects existing working capital and cash flows from operations to be sufficient to fund operations over the next 12 months[212]. Legal and Financial Liabilities - The company recorded an estimated liability of $29.1 million related to the Delaware Litigation in the year ended March 31, 2025[177]. - The company may face litigation and regulatory proceedings arising from the financial restatement, potentially resulting in significant judgments and legal expenses[95]. - The company has identified material weaknesses in its internal control over financial reporting, which could increase the risk of future misstatements and require additional restatements[108]. - The failure to timely file periodic reports with the SEC limits the company's access to public markets for raising capital, potentially leading to defaults under existing credit agreements[100]. - The company may incur substantial expenditures due to indemnification obligations for directors and officers, potentially discouraging lawsuits against them[124]. - The company may not be able to secure additional financing on favorable terms to meet future capital needs, which could delay expansion plans and reduce operating expenses[122]. - The company has total liabilities of approximately $75.3 million as of March 31, 2025[128]. - The Series A Preferred Stock ranks junior to all existing and future indebtedness and liabilities, which may affect the ability to pay dividends[128]. - The company has never declared or paid dividends on its Common Stock, with preferred dividends of $3.0 million paid for the years ended March 31, 2025, 2024, and 2023[163]. - The company issued promissory notes totaling $51.0 million as part of a settlement agreement, with annual prepayments of $2.95 million starting May 30, 2026[214]. - A revolving loan agreement was established with a total commitment amount of $20.0 million, available for working capital and general corporate purposes[215].
AMMO(POWWP) - 2025 Q4 - Annual Report